FINANCIAL REVIEW

More Worthwhile Pursuits

Sinclair Noe — October 12, 2015
Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)
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DOW + 47 = 17,131
SPX + 2 = 2017
NAS + 8 = 4838
10 YR YLD closed
OIL – 2.10 = 47.53
GOLD + 7.50 = 1164.90
SILV – .01 = 15.92

The Dow Industrials posted a gain for the seventh consecutive session, and ninth gain in the past 10 sessions. During the rally, the Dow has gained 1,130 points. Crude oil futures settled 5.1 percent lower after gaining almost 9 percent last week. The dollar was down slightly.

Dell and private-equity firm Silver Lake will buy EMC Corp. for roughly $67 billion in cash and stock, marking one of the largest technology-industry takeovers ever. The $33.15 a share price tag represents a 19% premium over Friday’s closing price. EMC also owns about an 80% stake in VMware, which will remain a publicly traded company. EMC holders will receive $24.05 a share in cash and in addition to tracking stock linked to a portion of EMC’s economic interest in the VMware business. VMware has a market value of about $33 billion.

The Dell deal is the largest in tech history, and it may be the biggest tech deal in terms of debt. Dell will add about $50 billion in debt to complete its proposed acquisition, bringing the closely held company’s total debt to about $60 billion.

Budweiser must really like Miller. Anheuser Busch InBev upped the ante again, making its fourth bid in the past few weeks for SABMiller, saying it’s willing to pay $103 billion in cash and stock. Under British takeover rules Anhesuer Busch InBev must make a formal offer by Wednesday or sit on the sidelines for at least 6 months. SABMiller, the world’s second largest brewer, has rejected three prior proposals since news first emerged in September that Anheuser-Busch InBev was interested in a merger.

The deal, if it were to be completed, would create a combined company with $64 billion in annual revenue that commands 30 percent of global beer sales. Any deal between the brewing giants would most likely face significant regulatory scrutiny.

Separately, the Justice Department is investigating allegations that Anheuser-Busch InBev is trying to cut competition by buying distributors, making it harder for fast-growing craft brewers to get their products on store shelves. In the past few months, A-B InBev has made deals for five distributors in three states. Many states require brewers to use distributors to sell their product, and once AB InBev buys a distributor, craft companies say they find that they can’t distribute their beer as easily and sales growth stalls.

A demonstration in Berlin on Saturday involved hundreds of thousands of protesters against the Transatlantic Trade and Investment Partnership being negotiated between the U.S and EU. The broad trade accord is seen as picking up momentum following last week’s Trans-Pacific Partnership deal, along with some gentle nudging from large multinationals. Groups in Europe are taking issue with TTIP’s lack of transparency and the potential impact on labor and safety.

Standard & Poor’s has cut its ratings on Catalonia by one notch to BB-, saying it expects increasing political tension following last month’s regional elections.

Greece’s new government faces a major test this week when several new economic reforms and austerity measures demanded by international creditors need to be voted on to become law. The Greek parliament will vote this week on an omnibus bill cutting pensions, raising the retirement age and increasing punishments for tax evasion ahead of the country’s first bailout review later this month. The reforms will need to be approved to unlock a fresh -euro loan installment from the country’s €86-billion-euro bailout.

Several dozen Republican congressmen have signed a petition that will force the House to vote on whether to revive the Export-Import Bank that helps American companies sell goods overseas. After the House votes on the Ex-Im Bank bill later this month, the Senate would still have to approve the measure.

The interest rate watch goes on. Here’s the latest twist. U.S. Federal Reserve policymakers are still likely to raise interest rates this year but that is “an expectation, not a commitment,” – so says Fed Vice Chairman Stanley Fischer at a weekend International Monetary Fund (IMF) meeting in Peru. Fischer also said “Considerable uncertainties” still surround the U.S. economic outlook, including the drag on exports from slowing global growth, low investment caused by the decline in oil prices and the recent “disappointing” drop in U.S. jobs.

This morning, Atlanta Federal Reserve Bank President Dennis Lockhart says the Fed will have plenty of new economic data to make a decision in December. And San Francisco Federal Reserve Bank President John Williams said that even “a little bit” more economic data could convince him to support a rate hike at the Fed’s next meeting, in October. Over the weekend Chicago Federal Reserve Bank President Charles Evans said the Fed that globally low inflation makes it “challenging” for the U.S. central bank to lift domestic inflation to its 2 percent goal.

Social Security recipients shouldn’t expect an increase in benefits next year. Adjustments are based on increases in inflation, however falling gasoline prices over much of the last year mean the cost-of-living adjustment, set to be announced Thursday, will likely be zero. The COLA adjustment affects payments to around 70 million Americans. This is just the third time in the past 40 years that Social Security would get no increase in next year’s benefits.

Much of the stock market is sensitive to the economic ramifications of Fed decisions, of course. But perhaps the sector with the most near-term sensitivity is the financial sector. The big banks are scheduled to report earnings this week, including: GS, BAC, WFC, C, JPM, and MS. While the broader market has recovered from losses sustained in the latter half of August, banks are still struggling. Other major earnings reports on the calendar this week include, Intel, GE, and Alphabet (formerly known as Google).

General Electric is in advanced talks to sell a specialty finance portfolio, worth more than $30 billion, to Wells Fargo. Reuters reports Wells Fargo has so far outbid other parties for General Electric’s vendor financing, commercial distribution finance and direct lending assets. A deal could be announced by the time Wells Fargo publishes its third-quarter earnings on Wednesday.

Glencore halted trading of its Hong Kong-listed shares overnight pending the announcement of an asset sale. The embattled mining giant then confirmed the sales process for its wholly-owned Cobar copper mine in Australia and Lomas Bayas copper mine in Chile. The deals are part of a broader plan Glencore has outlined to cut $30 billion in net debt, weather a slump in commodity prices and revive its shares (which have dropped 57% this year).

Copper rose 0.4 percent following a near 4 percent gain last week after production cuts by Glencore boosted base metals. Glencore plans to cut zinc production by a third. Zinc capped the biggest one-day gain in at least 26 years on Friday and copper jumped 3.1 percent.  The shift in output may not be enough to offset weak demand growth in China. Demand has been disappointing, but supply has also been worse than expected.

Fiat Chrysler  has disclosed the price range of Ferrari’s initial public offering that could value the luxury unit at close to $10 billion. The company will sell up to 10% of Ferrari in the IPO at a price of between $48-$52 per share and use the proceeds of the offering to help pay for its own turnaround plan.

Looking to secure a larger slice of the world’s biggest auto market, Ford is investing $1.8 billion over the next five years to expand research and development in China. The company also expects to introduce the C-MAX Energi, a plug-in hybrid, to the Chinese market next year. Beijing has been trying to encourage more electric vehicles to combat pollution, but progress has been slow due to the lack of infrastructure.

Angus Deaton, a Princeton economist, was awarded the Nobel Memorial Prize in Economic Science. The award committee said Deaton’s research has “shown other researchers and international organizations like the World Bank how to go about understanding poverty at the very basic level.” Deaton has criticized the widening income gap between rich and poor in the U.S.

In his 2013 book, “The Great Escape,” Deaton wrote that “inequality can sometimes be helpful” in promoting prosperity by giving people incentives to work harder and more efficiently. But last year Deaton wrote that he worried that high-paying jobs in finance and other fields were diverting talented young people from “more worthwhile pursuits.” He also warned that the very rich might be using their disproportionate influence to “write the rules in their favor, and they may work against the public provision of health care or education, for which they pay a large share but have little personal need.”

In a 2003 essay, Deaton wrote about the difficulty in determining how we define poverty. He wrote: Even if you have enough goods, they are worth little if you are not healthy enough to enjoy them. Children who live in an unsanitary environment will obtain little nutritional benefit from the food that they eat if they continually suffer from diarrhea. More broadly, girls who are denied the opportunity to go to school experience yet another type of poverty, the poverty of not being able to read and to participate in activities that are only open to the literate. People are also poor in another sense if they lack the resources to participate fully in the society in which they live, who in Adam Smith’s term “are afraid to appear in public,” even if their incomes would be sufficient in some other society.

Financial Review

Bueller? Bueller?

Sinclair Noe — October 9, 2015

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

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DOW + 33 = 17,084
SPX + 1 = 2014
NAS + 19 = 4830
10 YR YLD – .01 = 2.10
OIL + .14 = 49.57
GOLD + 17.40 = 1157.40
SILV + .16 = 15.93

World shares were green across the board after details from the Fed’s minutes cast further doubt on the prospect of a rate rise this year. European stocks broke a one-month high for their best weekly gain since late January on renewed hopes central banks will keep monetary policy loose for longer. Overnight, Asian equities and currencies also moved higher following yesterday’s gains on Wall Street (the Dow ended above 17,000 for the first time since August, while the S&P 500 closed well past its 50-day MA of 1,995).

Oil prices traded above $50 a barrel this morning, with a gain of nearly 9% this week; for the biggest weekly gain in 6 years.

Investors are now positioning themselves for corporate earnings season, which picks up steam next week with most of the nation’s largest banks reporting their results, as well as big companies including; Intel, Netflix, UnitedHealth and GE. Earnings are expected to be down roughly 5.5 percent from a year ago, according to FactSet, mostly because of the drop in commodity prices. Now there is a game on Wall Street where analysts set the bar very low and then celebrate when a company stumbles over it. However, if the index reports a decline in earnings for Q3, it will mark the first back-to-back quarters of earnings declines since 2009. In other words, the last time we had consecutive quarters of negative earnings growth, the US economy was in a recession.

Yesterday the Fed published the minutes of the September FOMC meeting; most of the attention was on the policymakers’ decision to leave interest rates unchanged for now; they’re worried about global economies and inflation running below their target of 2%; they think we are at or near full employment. Generally the tone was dovish. The current Fed has talked about raising rates for about a year.  Now we have the Fed saying future interest rate increases will be “data dependent.” Also in the minutes, we saw economic projections and they are basically calling for 2% GDP growth. Slow, sluggish – get used to it.

Emerging market currencies have had a strong week. The Indonesian rupiah was the leader with a 9.2% gain against the dollar, followed by the Russian ruble, with a 7.3% gain. The Malaysian ringgit gained 6.4%, and the Brazilian real was up 4.8%. This does not mean emerging market currencies are in a bull market; for now, it’s just a bounce.

If you follow all the data the Fed is looking at, you would stay quite busy; there are at least 30 economic reports that must be monitored in order to get a clue as to what the Fed’s next move will be. The quick and easy monitor is the dollar index, because the greenback affects just about every tradeable market: inflation, manufacturing, exports, trade balance, jobs, and more – in one handy chart. The dollar index is just a hair under 95. It has traded from a high of 98.7 in August to a low of 92.5 (also in August).

The dollar index has been in a downtrend since September 25, and this is why we have seen a bounce in oil (probably a greater cause than rig counts and demand, or Russia’s moves in Syria.) This is why the commodity indices have had a nice little rally in the month of October. Emerging-markets currencies have been battered over the past year by the expectation that the Federal Reserve will soon raise interest rates, but as the dollar has experienced a recent dip, the emerging currencies have bounced.

The trend lines on the dollar index suggest resistance around 97.5 and support, right about where we landed today; any further breakdown could see the dollar index testing the 92.5 lows. If we see a bounce, or even some sideways action here, then we look for the support and resistance trend lines to cross in the final week of the month, which is coincidentally, when the Fed FOMC holds its next meeting.

Today, New York Fed President William Dudley and Dennis Lockhart of the Atlanta Fed each said they expected a policy tightening in 2015 despite some recent red flags.

In a brief press conference yesterday, Rep. Kevin McCarthy announced he would not seek the nomination as House Speaker, saying he was still short of the support needed to be an effective speaker. Rep. Jason Chaffetz of Utah, current House Oversight chairman, and Rep. Daniel Webster of Florida were running against McCarthy. Rep. Darrell Issa of California says he’s considering jumping into the race for House speaker; Issa says he would support Paul Ryan of Wisconsin, the Chair of the House Ways and Means Committee; Ryan has said he does not want the job. Anybody else? Anybody? …Bueller?

Meanwhile, Congress faces another deadline to lift the debt limit on Nov. 5; today John Boehner acknowledged that getting enough votes to pass a debt-limit increase would be difficult. And another potential government shutdown threat looms in December when the current stop-gap spending bill expires.

U.S. import prices declined 0.1 percent. A surge in value of the U.S. dollar last year, fueled by expectations a strengthening U.S. economy would lead to higher interest rates, has been a factor pushing down inflation, evident by declines of non-oil import prices. The smaller than expected decline in import prices might lay a bit of groundwork for an eventual interest rate hike by the Federal Reserve because a smaller downward push on inflation from imports could alleviate the Fed’s concerns that inflation is too low.

In a separate report, the Commerce Department said wholesale inventories rose 0.1 percent in August, boosted by larger stocks of computers and professional equipment used by businesses. Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP – wholesale stocks excluding autos -rose 0.1 percent. At August’s sales pace it would take 1.31 months to clear shelves. An inventory-to-sales ratio that high usually means an unwanted inventory build-up, which would require businesses to liquidate stocks. That in turn could weigh on manufacturing and economic growth.

Glencore is slashing its zinc production by a third in reaction to a 30% plunge in the commodity’s price over the past few months. The company will cut 500,000 tons of zinc production, 4% of the world’s total supply. Glencore is the world’s biggest miner of the industrial metal.

Chipmaker Intel is set to get the go-ahead from EU antitrust regulators for its $16.7 billion offer for Altera. A decision is scheduled by Oct. 14.

PC sales dropped sharply again in the third quarter. IDC estimates global PC shipments fell 10.8% year-to-year to 71 million units, a drop nearly as large as the second quarter’s 11.8%. Sales have been declining for so long — 14 consecutive quarters — that it is becoming harder to remember a time when PCs ruled the tech world. However, the market’s four biggest players all grabbed share from smaller firms with less scale. IDC calculates market leader Lenovo’s unit share rose 130 basis points year-to-year to 21%, HP’s increased 110 basis points to 19.6%, Dell’s jumped 120 bps to 14.3%, and Apple’s climbed 60 basis points to 7.5%.

Apollo Education Group, the parent company of The University of Phoenix has released information that the Department of Defense has suspended the university from recruiting military students. University of Phoenix, the largest for-profit college in the US, has brought in $1.2 billion in GI Bill money since 2009 and received $20 million in tuition assistance from the Pentagon last year alone. That outsized share of the market, in addition to alleged predatory tactics at the school to lure in military personnel, resulted in an investigation into the school earlier this year. Though the order to stop military recruitment at the University of Phoenix is not yet permanent, it is likely a distressing development for the school, as well as the larger for-profit college industry.

Combining two vaccine components from Crucell Holland and Janssen Pharmaceutical, Johnson & Johnson is beginning clinical trials of a preventive Ebola vaccine regimen in Sierra Leone. Is the Ebola outbreak finally over? For the first time since the disease was reported in March 2014, the World Health Organization reported no new cases over the past week. According to the WHO, this is part of a trend: The number of cases in West African countries has remained below 10 per week over the past three months, but that doesn’t mean the virus can’t surface again. A total of 11,300 have died since the start of the epidemic.

According to the International Monetary Fund, 6.5 percent of global gross domestic product currently goes to energy subsidies. The United Nations Environmental Program has just published a report calling for a $6 trillion cut of public and private investments in high-polluting energy by 2030. The agency estimates the world’s governments and private institutions should be investing $5 to $7 trillion annually on things like infrastructure improvements, clean energy, sanitation and agriculture, starting now, in order to meet the U.N.’s 2030 goals for reducing the pollution that causes climate change.

The 2015 Nobel Peace Prize was awarded today to Tunisia’s National Dialogue Quartet for its efforts to bring democracy to the country. The National Dialogue Quartet is made up of four organizations: the Tunisian General Labor Union; Tunisian Confederation of Industry, Trade and Handicrafts; Tunisian Human Rights League; and Tunisian Order of Lawyers. The Tunisian revolution, which forced the country’s long-time president to step down in what was called the Jasmine Revolution, led to uprisings against dictators in other nations including Egypt, Libya and Syria in what became known as the Arab Spring. Today, Tunisia is the only country in the region to make genuine progress transitioning to a democracy.

Financial Review

The Courage to Act, or Not

Sinclair Noe — October 5, 2015

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

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DOW + 304 = 16,776
SPX + 35 = 1987
NAS + 73 = 4781
10 YR YLD + .07 = 2.06%
OIL + .72 = 46.26
GOLD – 2.50 = 1136.90
SILV + .40 = 15.77

The Dow Industrial Average has gone from a low of 16,013 Friday morning after the jobs report to an intraday high today of 16,798, or a swing of 785 points. The S&P 500 rose for a fifth session in a row, its longest winning streak this year

The US, Japan and 10 other Pacific Rim economies have reached agreement to strike the largest trade pact seen anywhere in two decades. The Trans-Pacific Partnership covers some 40% of the global economy and will create a new Pacific economic bloc with reduced trade barriers relating to the flow of everything from beef and dairy products to textiles and data as well as new standards and rules for investment, the environment and labor.

Former Fed Chairman Ben Bernanke has published a new book, entitled “The Courage to Act” and so he’s making the rounds. In a CNBC interview, Bernanke said that slow productivity growth is weighing on the economy, and there’s too much reliance on the central bank. He said other policymakers in the government need to step up. He refused to second guess current Fed Chair Janet Yellen on her decision not to increase rates at the Fed’s September meeting.

In an interview with USA Today, Bernanke said that more corporate executives should have gone to jail for their misdeeds. Bernanke explained that the Fed did not have the authority to jail anyone. Rather, it was the Department of Justice’s responsibility to do that. And while a few folks here and there went to prison for various violations, it’s largely been the financial entities that have paid the penalties.

“A financial firm, of course, is a legal fiction,” Bernanke explained. “It’s not a person. You can’t put a financial firm in jail.”

“It would’ve been my preference to have more investigation of individual actions because obviously everything that went wrong or was illegal was done by some individual, not by an abstract firm,” he continued. “In that respect, there should’ve been more accountability at the individual level.”

So, on the one hand you have the former Federal Reserve chairman saying, after the fact, that people should have gone to jail but the financial firms are abstractions. Then on the other hand you have the former attorney general Eric Holder’s infamous quote that some financial institutions became so big, “that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.” And on the other hand we have the Supreme Court, which has determined that corporations are people, even if Ben Bernanke says they’re fictitious and he can’t figure out how to lock them up.

The U.S. Supreme Court this morning rejected a U.S. Justice Department bid to restore the insider trading convictions of two hedge fund managers and reverse a lower court’s ruling that prosecutors contend will make it harder to bring such cases. The justices left in place a December ruling by the 2nd U.S. Circuit Court of Appeals in New York that threw out the 2012 convictions of hedge fund managers Todd Newman and Anthony Chiasson for engaging in a scheme involving tips about Dell and Nvidia.

In overturning the convictions, the appeals court said prosecutors needed to show that the person disclosing the information received a clear benefit, something more than the nurturing of a friendship. The appeals court also said the person being prosecuted had to know about the benefit. That issue wasn’t before the Supreme Court.

Yes, the Supremes are back in session, and they have some important cases on the docket, including: Evenwel v. Abbott, which will dig into the concept of one-person, one vote; also, Friedrichs v. California Teachers Association, which pits the practical needs of collective bargaining against the First Amendment and could have huge political consequences by crippling public employee unions and possibly all unions; and waiting in the wings at the high court are two politically incendiary cases: one involving abortion, the other birth control under Obamacare.

Saudi Arabia cut prices on oil sales over the weekend as it plays catch-up with OPEC and other producers in the region. State-run Saudi Aramco reduced prices significantly on oil sent to Asia and the U.S. The Saudi strategy is to keep producing oil at high levels in anticipation of improved demand at lower price points. Meanwhile, Russia is ready to meet with members of the Organization of Petroleum-Exporting Countries (OPEC) — as well as non-member oil producers — to discuss the situation facing global oil markets.

The Institute for Supply Management said its services index fell to 56.9% from 59% in August. New orders and prices paid were down, but any reading above 50 indicates growth, and this report marks the 68 consecutive month of growth in the services sector of the economy.

General Electric has drawn a big investment from activist shareholder Nelson Peltz. Peltz’s Trian Fund Management has accumulated $2.5 billion in GE shares since the middle of May —a roughly 1% stake —making it one of the company’s top 10 shareholders. While Trian has some criticism of the company, both sides say they are in agreement on most aspects of GE’s current direction, which includes the sale of the majority of its giant financing arm. Trian hasn’t requested a GE board seat.

Twitter has announced that co-founder and interim CEO Jack Dorsey will stay on as permanent chief executive. As Dorsey formally takes on the Twitter CEO job — after more than three months of drama and speculation — investors are bound to wonder which of Dorsey’s two companies will get short shrift. As Dorsey is reprising his role as Twitter CEO, he is also going to be taking his second company, mobile payments startup Square, public.

American Apparel filed for Chapter 11 bankruptcy in Delaware. The company plans to keep stores open while it seeks approval for its restructuring plan with lenders through the bankruptcy court.

Shares in Google have stopped trading, and have in fact ceased to exist. Instead, you can now trade Alphabet, the parent company for Google. Alphabet is a group of companies, many of which were acquired or developed internally by what used to be Google Labs. The biggest part of Alphabet stock that investors need to watch is the now-focused subsidiary of Google internet businesses.

All those advertising dollars that drove GOOG stock before will still do so, and they will come from this unit. Both GOOG stock and GOOGL stock will continue to trade separately, and at the same previous prices. They are ownership stakes in the parent company, Alphabet. GOOG stock will represent Class C shares of Alphabet, but with no voting rights, while GOOGL stock represents Class A shares with one vote each.

If you trade stocks on Scottrade you might want to be a bit more vigilant. Hackers had access to Scottrade’s network for “a period of several months” in late 2013 and early 2014. The retail brokerage posted a notice on its website. The company said it believes that contact information, names and addresses were the focus of the breach, although “sensitive data” such as Social Security numbers and email addresses were also in the system that was breached. The information of 4.6 million clients was contained in the targeted database, and Scottrade is providing a year of identity protection services to those clients. Scottrade said it is directly notifying clients who had an account before February 2014 that their data may have been accessed.

The FTSE 100 was up about 2.5% and almost the entire move can be attributed to Glencore. The commodities giant Glencore was briefly up 21% in London, and it had jumped by as much as 70% in Hong Kong trade after rumors circulated that management would listen to takeover offers. The company’s board disputed those claims in a press release, however, saying, “It is not aware of any reasons for these price and volume movements or of any information which must be announced to avoid a false market.”

Canadian fertilizer company Potash has backed out of its $8.8 billion takeover attempt of its German rival K+S. According to Potash, it’s dropping the bid because of market conditions and a lack of commitment from K+S management. Back in August, K+S said Potash’s bid undervalued the company and would eliminate jobs

Ford reached a key agreement with a union representing workers at an F-150 plant in Missouri. The UAW workers still need to vote on the deal which covers employment conditions, not the wage levels being negotiated on a national level. The development is crucial for Ford as the Kansas City-area plant is a major producer of the new F-150. Any slowdown in production would create a ripple of worry with F-150 sales continuing to gain momentum in the U.S.

Volkswagen will hold a special board meeting to review n internal investigation on the emissions cheating crisis. One of the biggest challenges for the VW board is how deeply to cut into Volkswagen’s investment budget in order to try to stave off credit agency downgrades.

Air France said last week it was planning cuts to jobs, jets, and routes in the absence of a deal with pilots, who had been asked to work more hours for the same pay to help end annual losses that began in 2011. Air France workers “stormed” the company’s headquarters at Charles de Gaulle Airport near Paris after it threatened to cut 2,900 jobs, interrupting a meeting with union representatives and ripping executives’ clothes off.

Financial Review

Canoe Trips on Mars

Sinclair Noe — September 28, 2015

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

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DOW – 312 = 16,001
SPX – 49 = 1881
NAS – 142 = 4543
10 YR YLD – .07 = 2.09%
OIL – .03 = 44.40
GOLD – 14.20 = 1133.10
SILV – .53 = 14.70

Well, this was just ugly. All three major indices traded in correction territory today or more than 10 percent below their 52-week highs. For the Nasdaq Composite, the 50 day moving average crossed the 200 day moving average, forming a pattern that goes by the catchy name “death cross”. The Nasdaq Biotechnology ETF closed down 6.3%, following a 5% drop on Friday.

Shares in mining and trading company Glencore fell almost 30 percent and closed at a record low, wiping out more than $5 billion in market valuation. The fall followed publication of a note by analysts at investment bank Investec which raised doubts about Glencore’s valuation if spot metal prices do not improve. The note pointed to high debt levels and a need for deeper restructuring. The analysts wrote: “If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate.” Glencore, a Swiss based company, has said it will suspend dividends, sell assets and raise cash with a $2.5 billion share placement, among other measures, to cut its $30 billion debt pile and protect its credit rating.

The 15-month commodities free-fall is starting to resemble a full-blown crisis. A Bloomberg index of commodity futures has fallen 50 percent since a 2011 high, and eight of the 10 worst performers in the Standard & Poor’s 500 Index this year are commodities-related businesses.

Alcoa the world’s largest aluminum producer, says it will split into two separate publicly-listed companies, with the separation expected to be completed in the second half of 2016. The company says the split will create an “upstream company”, focused on bauxite, alumina and aluminum, and a “value-add company”, focused on innovation in “high performance multi-material products and solutions in attractive growth markets”.

Royal Dutch Shell has abandoned its Arctic search for oil after failing to find enough crude. Shell has spent about $7 billion on exploration in the waters off Alaska so far and said it could take a hit of up to $4.1 billion to shut down exploration in the region. The unsuccessful campaign is Shell’s second major setback in the Arctic after it interrupted exploration for three years in 2012 when an enormous drilling rig broke free and ran aground. Environmental groups and shareholders have also pressured Shell to drop Arctic drilling.

The IMF warns world GDP at 3.3% this year isn’t realistic anymore, and a forecast of 3.8% for next year is not either. IMF Director Christine Lagarde pointed to slowing growth in emerging economies, in particular China. Lagarde says “There is no reason (for the Federal Reserve) to rush” to tighten policy, noting both the Japanese central bank and the ECB in recent years both hiked and then were forced to quickly retreat.

The Federal Reserve will probably raise interest rates later this year and tighten policy gradually thereafter, so says William Dudley, New York Fed President, echoing statements from Fed Chair Janet Yellen last week. Dudley, who cautioned in late August that the uncertain global outlook made the case for a rate increase in September less compelling, said his expectation on the timing of liftoff was “not calendar guidance. It depends on the data.” San Francisco Fed President John Williams, also speaking today, made a similar argument.

As world growth falters, the US consumer rolls along. Most of the change over the past quarter related to China. The Chinese currency was devalued, and many Chinese economic indicators continued to slow. China has showed lower growth rates and missed growth forecasts for several years. The news this morning shows Chinese industrial profits fell 8.8% in August year-over-year. It’s not new news. Still, the devaluation brought some already well-known weaknesses to the forefront. And as we have long been expecting, a slowing China generally has helped the U.S. economy as the small decrease in exports has been more than offset by lower commodity prices, which puts more money in consumer pockets.

Purchases of new cars and trucks and strong back-to-school sales drove consumer spending higher in August, a sign the economy continues to expand at a moderate pace. In August, consumer spending rose a seasonally adjusted 0.4% to match the revised gain in July. Personal incomes rose 0.3% last month. Incomes have also risen steadily since the early spring, largely reflecting strong job creation that’s tugged the unemployment rate down to a post-recession low of 5.1%. Since spending grew faster than income, the amount of money individuals save fell a tick to 4.6% from 4.7%. Inflation as gauged by the PCE price index, was unchanged in August. The PCE index is up just 0.3% in the past 12 months.

This week’s big economic report comes on Friday, when the Labor Department publishes the September employment report. The consensus estimate calls for 190,000 new jobs in September. The unemployment rate is likely to remain at 5.1%.

A gauge of pending home sales fell 1.4% in August to the lowest level in five months. The index from the National Association of Realtors declined to a seasonally adjusted 109.4 in August from 110.9 in the prior month. Pending sales have leveled off since mid-summer, with buyers being bounded by rising prices and few available and affordable properties within their budget.

The federal government is funded only through Wednesday but House Speaker John Boehner says there won’t be a government shutdown. Speaking on CBS’ “Face the Nation,” Boehner confirmed plans to pass a short-term funding bill. Boehner, who announced Friday he is resigning from Congress at the end of October, also said he will set up a committee to investigate Planned Parenthood.

President Obama addressed the United Nations General Assembly this morning, saying the US is was willing to cooperate with Russia, as well as Iran, to try to end the Syrian civil war but the two big powers clashed over whether to work with Syrian President Bashar al-Assad, whom Obama called a tyrant. Russian President Vladimir Putin, in contrast, told the gathering of world leaders that there was no alternative to cooperating with Assad’s military in an effort to defeat ISIS. Later, Obama and Putin met privately.

In opening the General Assembly, Secretary General Ban Ki-moon struck a sober theme, asserting that: “Inequality is growing, trust is fading, and impatience with leadership can be seen and felt far and wide.” Mr. Ban called explicitly for an “end to bombings” in Yemen, and named the five countries that, as he said, “hold the key” to peace in Syria: Russia, the United States, Saudi Arabia, Iran, and Turkey.

Pro-independence parties won a majority 72 seats (out of 135) in Catalonia’s regional parliament, but took down only 48% of the vote. Blocked by the national government from holding a referendum on independence, the separatists attempted to turn these elections into just that. While they won a majority of seats, the failure to gain more than 50% of the vote means had this been a referendum, it would have been a loss.

Apple said it sold more than 13 million iPhone 6s and 6s Pluses during their first weekend on the market. The company beat its previous record of 10 million in sales for the previous generation of iPhones in its first weekend in 2014. This year’s results benefited from the inclusion of the Chinese market, where regulatory problems delayed the gadget’s debut last year.

Whole Foods Market said it would cut about 1,500 jobs, or about 1.6 percent of its workforce, over the next eight weeks. The cuts are aimed at reducing costs as the company invests in technology upgrades. Whole Foods said in May that it would launch a new chain of smaller, more value-focused shops next year.

Scientists say there is water on Mars. In a paper published in the journal Nature Geoscience, scientists report definitive signs of liquid water on the surface of present-day Mars, a finding that will fuel speculation that life, if it ever arose there, could persist to now, or possibly in the future. In the research, Dr. Alfred McEwen, a professor of planetary geology at the University of Arizona and the principal investigator of images from a high-resolution camera on NASA’s Mars Reconnaissance Orbiter, along with other scientists discovered in photographs from the Mars Reconnaissance Orbiter dark streaks descending along slopes of craters, canyons and mountains. The streaks lengthened during summer, faded as temperatures cooled, then reappeared the next year.

The researchers were able to identify the telltale sign of a hydrated salt at four locations. In addition, the signs of the salt disappeared when the streaks faded. In other words, small rivers of liquid water; briny water, but water nonetheless. The salts lower the freezing temperature, and the water remains liquid. The average temperature of Mars is about minus 70 degrees Fahrenheit, but summer days near the Equator can reach an almost balmy 70.

Many mysteries remain. For one, scientists do not know where the water is coming from. One theory is that the salts act like a sponge to soak up moisture from the environment. The other possibility is underground aquifers, frozen solid during winter, melting during summer and seeping to the surface.